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IMF says governments could set up their own cryptocurrencies
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Governments should consider offering their own cryptocurrencies to prevent the systems becoming havens for fraudsters and money launderers, Christine Lagarde, head of the International Monetary Fund said referring to the fast-growing fintech industry.
Lagarde said central banks had to work quickly to establish digital cash for burgeoning networks of private financial transactions or risk their mushrooming into trading networks that were inherently unstable.
A system regulated by central banks could become the basis for a rapid expansion of financial services to developing world countries and the poorest people in western societies without the risks associated with privately managed digital currencies, she saidme to regulate bitcoin, says Treasury committee report

 
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The IMF’s proposal is likely to be greeted warily by many digital currency operators who believe one of the main attractions of their technology is that it lies outside the mainstream banking system. The involvement of a central bank could also be seen as imposing heavy-handed regulation that would slow down transactions and raise costs.
However, businesses wishing to use the underlying blockchain technology to process transactions are likely to welcome the IMF’s endorsement and the involvement of central banks in preserving the integrity of new financial systems.
The which is watching developments in digital currencies closely, already runs the systems that process stock exchange and banking transactions, and oversees the cash and coins that a digital currency is expected to replace.
Speaking at a fintech conference in Singapore, Lagarde said central banks would take over the processing of transactions while private-sector providers offered innovative services to customers.
“The advantage is clear. Your payment would be immediate, safe, cheap, and potentially semi-anonymous. And central banks would retain a sure footing in payments. In addition, they would offer a more level playing field for competition, and a platform for innovation. Meanwhile your bank or fellow entrepreneurs would have ensured a friendly user experience based on the latest technologies,.
“Putting it another way. The central bank focuses on its comparative advantage – back-end settlement – and financial institutions and start-ups are free to focus on what they do best – client interface and innovation. This is public-private partnership at its best.”
Blockchain technology, which underpins cryptocurrency transactions, allows users to maintain a digital account and be paid in a digital currency such as bitcoins. They can use the account, or digital wallet, to make purchases without their identity being revealed.
Billions of pounds of investment is going into startup businesses that offer services based on blockchain technology, which they say can be cheaper and quicker than services offered by mainstream banks.
But currencies such as bitcoin and ethereum have had dramatic increases and falls in value, limiting their take-up. Bitcoin has also suffered setbacks following a spate of robberies at digital currency exchanges which have left customers millions of pounds out of pocket.
Sweden’s central bank has run tests and the IMF has credited Canada, China and Uruguay as also moving ahead with plans to provide a digital currency.
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Lagarde said many consumers were wary of using bank accounts to buy goods and services because they could be tracked by third-parties such as insurers, who could increase charges based on transactions data.
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She said it was legitimate to prefer digital cash but that central banks needed to have oversight to prevent customer funds being stolen and to stop abuses by criminal gangs. IMF research showed that only central banks could develop systems that would be safe enough to meet the needs of the modern user.
Lagarde added: “A new wind is blowing, that of digitalisation. In this new world we meet anywhere, anytime. The town square is back – virtually, on our smartphones. We exchange information, services, even emojis, instantly … peer to peer, person to person.
“We float through a world of information, where data is the ‘new gold’, despite growing concerns over privacy and cyber-security. A world in which millennials are reinventing how our economy works, phone in hand. And this is key; money itself is changing. We expect it to become more convenient and user friendly, perhaps even less serious looking.
“We expect it to be integrated with social media, readily available for online and person-to-person use, including micropayments. And, of course, we expect it to be cheap and safe, protected against criminals and prying eyes.”

Source: https://www.theguardian.com/business/201...currencies
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